Blog

The Agencies, Neutrality, and Data Ownership

August 16th, 2018 | Ratko Vidakovic,
Founder, AdProfs

Last month, it was announced that global agency Interpublic Group (IPG) acquired Acxiom Marketing Solutions (AMS) for $2.3 billion in cash. It’s worth noting that AMS is only one part of the Acxiom business. The other part is LiveRamp, which was not included in the deal and will remain independent. (The LiveRamp business handles data onboarding and identity matching to build custom audiences segments from offline CRM data.)

By acquiring AMS, IPG plans to offer more services around data strategy and management. The deal also means IPG will be getting into the business of data sales, which raises some important questions for brand marketers.

Fee pressure in the agency world, among other factors, make it a challenging business. This forces many agencies to look for ways to diversify revenue. That’s why a company like IPG would want to get into more profitable businesses like data management and sales.

From a business perspective, the margin on data is phenomenal, and it scales very well, so it’s a highly lucrative product compared to straight services. Audience data is a reusable asset that can continue to be sold as long as there are buyers. In many cases, the cost can be higher than the media itself.

To be sure, though, there are many questions and concerns around the quality of third-party audience data. There was recently a research paper out of the Melbourne School of Business that found third-party audience data to be “often inaccurate.”

With privacy laws getting increasingly stricter around the world, and the increased drive toward transparency in all facets of digital advertising, the future of third-party data is uncertain to say the least. At the same time, companies that can figure out how manage (quality) third-party data in a legal way have an opportunity to capitalize on a less-crowded market.

With that in mind, IPG would seem to believe that it makes more sense to own such data rather than “rent” it from data brokers. The company also admitted that data is a higher margin business than its traditional service business, which is where the financial incentive comes into play. IPG CEO Michel Roth said that AMS would add “steroids to our Cadreon business.”

This obviously raises the question of neutrality. Despite claims that it will remain neutral, IPG will still have a financial incentive to use its own data over outside data.

In theory, agencies ought to be providing strategy and recommendations, while remaining neutral to technology, media, and data. But moves like this muddy the already-muddy waters. Will IPG clients be getting the best data, or the most profitable data (for IPG)? More broadly, can any agency be reasonably expected to act neutrally in cases where they own media, data, or technology?

IPG exec Philippe Krakowsky said, “We see opportunities to take core data management and consulting expertise and sell that to clients.”

AMS was a declining business before it was acquired. However, IPG has the power to channel business towards Acxiom data and get it back to growth again, which is almost certainly part of the plan. Additionally, it can leverage the expertise within AMS to offer data management as a service.

This can be a compelling offer, especially for less-technical brands that may not have the DNA to handle data management in house. But it comes with serious tradeoffs, and it remains to be seen how well received it will be by the market.

As a CMO, can you trust your agency with your data if they are, at the same time, also in the data business? How can you be certain that they are not enriching their own DMP with your data, or selling it to other clients? Where are the boundaries? Things can get very fuzzy with data ownership very quickly. Sure, there are legal measures. But from a technical standpoint, it’s almost impossible to know what is happening behind the scenes.

Rival agency Omnicom recently took a contrary stance, maintaining the importance of remaining a neutral agent. “We have fallen on the side of renting the data, versus buying the company that compiles the data,” said Omnicom Digital CEO Jonathan Nelson. “We just believe that this enhances our position of neutrality and removes any perceived conflict we might have with our direct clients.”

Indeed, there may not be any actual wrongdoing with agencies selling their own audience data, while simultaneously offering data management to clients. However, it nonetheless carries the potential for perceived conflict. At a time where data ownership and control is increasingly important, and in light of expanding privacy regulations, data management is an area where brands need to be extra prudent in granting stewardship over their data.